The Supreme Court rules against a couple who pleaded guilty and paid in full, saying the crime was an 'aggravated felony' subject to automatic deportation. Tax lawyers say the decision is ominous.

Akio and Fukado Kawashima came to Southern California in 1984 as lawful Japanese immigrants determined to succeed in business. They operated popular sushi restaurants in Thousand Oaks and Tarzana and recently opened a new eatery in Encino.

But after they underreported their business income in 1991, they paid a hefty price. The Internal Revenue Service hit them with $245,000 in taxes and penalties. The couple pleaded guilty and paid in full. A decade later, the Immigration and Naturalization Service decided to deport them.

Last week, the U.S. Supreme Court delivered the final blow, ruling 6 to 3 that Immigration and Customs Enforcement — as the INS is now known — was within its authority to declare such a tax crime an "aggravated felony," subjecting an immigrant to automatic deportation. Once limited to murderers and drug kingpins, this deportation trigger has steadily expanded over the years.

"It's really sad — and really unfair," Wakako Kawashima, the couple's daughter-in-law, said at the door of her home in Thousand Oaks.

The restaurants have been the couple's life work, she said, and the family is crushed that a mistake two decades ago could result in their deportation.

Tax lawyers said the ruling in the case of Kawashima vs. Holder sends an ominous warning to legal immigrants throughout the country, and especially to small-business owners whose tax liabilities may be large enough to attract IRS attention.

Under the court's holding, an immigrant who makes a false statement on a tax return could face not only tax charges but also automatic deportation.

The Kawashimas never became U.S. citizens but were granted lawful permanent residency in the 1980s. They pleaded guilty in 1997 to filing a false corporate tax return, and the husband was given a four-month prison sentence.

"They paid a full restitution at the time to everything they owed the government," said Thomas Whalen, a Washington attorney who represented the couple before the high court.

Immigration authorities issued the deportation order under a provision of law added by Congress in 1994 that defined "aggravated felony" to include crimes of "fraud or deceit" that cost the victims more than $200,000, a threshold later lowered to $10,000.

The couple had appealed to immigration judges and to the federal courts but lost in a split decision before the U.S. 9th Circuit Court of Appeals.

Their hopes were revived last year when the Supreme Court agreed to hear their appeal. Judges in other parts of the country had rejected the idea that underreporting taxes amounted to an aggravated felony.

But Justice Clarence Thomas, speaking for the court, said the Kawashimas had "knowingly and willingly submitted a tax return that was false" and "therefore had committed a felony that involved 'deceit.'"

In dissent, Justice Ruth Bader Ginsburg said it was "implausible" to believe Congress saw this tax crime as "sufficiently serious to warrant the drastic measure of deportation." Justices Stephen G. Breyer and Elena Kagan agreed with her.

This decision "should send a shock wave through the resident alien community," said Sanford Millar, a tax lawyer in Los Angeles. "What's surprising is that this would be deemed an aggravated felony."

The ruling could, for example, trigger deportation for immigrants working in the United States who fail to report foreign bank accounts as required by the IRS, he said.

But tax experts note that the ruling applies only to criminal tax violations, not civil claims that result in repayments.

Wakako Kawashima said her in-laws are "embarrassed" by the legal tangle and are still trying to absorb the ruling. "They know the decision, but they're trying to figure out what to do," she said.

Her husband, Hiroshi, 36, helps run the restaurants with his parents. On Friday, he was busy at work in Encino, helping to open the newest eatery in their mini-chain.

At the Thousand Oaks eating spot, called Cho Cho San, customers were beginning to fill the seats for the lunch rush. The restaurant, with gleaming glass doors and landscaped gardens, is a popular local stop for sushi and other Japanese specialties.

Stephanie Stanziano, a hostess, said news of the court's decision had not reached the staff. She was saddened by the couple's plight. "Oh, that's terrible!" she said.